MBS Live Recap: Did The Fed Make a Mistake Yesterday? Today's Data Says Maybe

I imagine if you polled a thousand people who were among the most qualified to have an opinion about today's nonfarm payrolls forecast, you'd have been lucky to encounter a single person who would be willing to predict a number over 300k.  I'm not saying that those people couldn't fathom such a thing--simply that there was an overwhelming agreement about the fact that this jobs report would be smaller than the last one.

But then today happened!  In some ways, you could argue last month's report was better, but it doesn't much matter.  All we needed to see was the headline of 304k to know there would be trouble.  In the bond market's defense, there wasn't much trouble until the 10am econ data got involved (ISM manufacturing found a floor and bounced, Consumer Sentiment didn't tank as much as expected a result of the shutdown).  Along with a beat in construction spending, this rounded out a full slate of surprisingly strong data (not majorly surprising, mind you, but in light of the Fed's concern yesterday, it was striking).

So did the Fed make a big mistake by being so cautious Wednesday?  Maybe!  There's absolutely no way to know right now.  In that sense, the Fed couldn't have made a mistake because it simply said it was going to pull the oars in and see what the current was doing before trying to row its boat any more for now.  Bonds haven't even had to give back all of their post-Fed gains yet, so they're suggesting they too will wait and see before jumping to any conclusions about one day of econ data.  It was worth and adjustment in the fervor of bond buying demand, but nothing more until further notice.